There were a few articles kicking around yesterday touting a figure that ‘Lady Gaga earned $167 from Spotify for over a million plays’ – I think the story originated on TorrentFreak.

Perhaps not surprisingly the writers at TorrentFreak aren’t too au fait with the way that payment systems work for artists. The figure quoted is a publishing royalty – it’s from STIM (The Swedish Performing Rights Society).It doesn’t reflect payments due to the performer direct from Spotify (outlined in somewhat confusing detail in this Guardian article) which, according to the CEO of We7, are roughly ten times the PRS-collected royalty payment. It’s this figure that may or may not have been negotiated downwards by Spotify with the major labels – the labels have pretty much no say over the rates that the PRS set (other than through lobbying).

There’s also no mention of whether that’s the fee going to Stefani Germanotta (apparently Lady G’s real name) or whether that’s the entire payment, to her publisher, of which she and the other writer, RedOne, get a share.)

So, we now have a situation where for 1 million listens (that’s not downloads, or tracks sold, it’s listens) Lady Gaga has received a royalty of $167 (approx £100, give or take 49p) plus, according to estimates, a performers payment of $1670.

This also doesn’t take into account

any (unreported on) direct sales through the service (via Spotify’s digital partner 7Digital),

anyone listening on Spotify to audition the track, then heading elsewhere to buy it (because, say, they have an iTunes account that they use for buying tracks, but use Spotify to listen to them because iTunes has painfully annoying 30 second previews).

The article does mention that she’s had 20 million paid downloads. 20 MILLION paid downloads. (that warrants a Dr Evil pinky-in-the-corner-of-the-mouth pose).

Yup, that’s not the headline, that her digital strategy that includes Spotify has lead to her selling 20 MILLION downloads – in an age when any of those 20 million sales could’ve been grabbed from a file sharing service or copied from a friend (I’m taking a wild guess that Lady Gaga fans run in packs – she doesn’t strike me as the kind of artist that appeals to the friendless reclusive goth kid with the idiosyncratic taste).

No, instead, the fact that for 1 million listens via ‘radio on-demand service‘ (which is what the non-premium version of Spotify really is), she was paid WAY more than she would’ve got for an equivalent number of listeners on, say Radio one’s breakfast show.

So, if we multipy that by the length of ‘Poker Face’, which Spotify tells me is 3.57 (we’ll round up to four minutes), that’s

£17.68 x 4 = £70.72, for 7.7 million listeners.

So, let’s divide that by 7.7 to get the value for 1 million listeners:

£70.72 ÷ 7.7 = £9.18, for 1 million radio one breakfast show listeners

And no additional artist payment from the BBC, as well as no direct link to a place to buy it next to the track, a good chance that a big number of those listeners wouldn’t even find out who it was and no way of the person hearing it saying ‘hey, check this out!’ with a direct link to everyone else that they’re friends with and therefor likely to share some music taste with.

Spotify isn’t by any stretch perfect. I’ve written about this before. But it’s not the disaster this bogus, statistically questionable, piss-poor journalism is making out.

Just to repeat, the headline here is that in an age when people can Torrent whatever they want, Lady Gaga’s digital strategy has netted her 20,000,000 paid downloads. An ocean-liner filled with WIN is sailing her way.

I’d have to argue with your maths here Steve. That is, while you may have done the sums correctly, the comparison is incorrect. The way of accounting to artists is hugely different. Radio 1 does not pay per listen – as Spotify does – but per play. Number of listeners are not taken into account on a per-play basis. A place on a R1 playlist will automatically pay better than listens on Spotify.

Not to mention that while there may not be ‘no additional artist payment from the BBC’ (I’m not sure what you mean by this with reference to Spotify – are you referring to recording royalties?), the PRS income will be split with 50% going direct to the publisher (which will then be split approx 80/20 between writer/publisher) and 50% directly to the writer(s).

The ideology behind Spotify is that one can access all the world’s music whenever wherever. So ideally people wouldn’t need to buy albums or even in digital format. In that kind of world Spotify would be the primary source of income (excluding gigs and fan stuff).

“Yup, that’s not the headline, that her digital strategy that includes Spotify has lead to her selling 20 MILLION downloads”

“Include” doesn’t mean Spotify’s role in that 20 million downloads would be even significant. For me it sounds a bit strange that people would by digital version, say, from iTunes if he/she already has superior access to that song with Spotify (it doesn’t seem to be so yet but it most probably will be in the future). And I really think Spotify (or something like Spotify) will be the future platform for listening music.

As an independant, Steve, you’re on Spotify via CD Baby right? How straight forward are the calculations in your case? You mentioned “fractions of a penny” per play in this post. But is it more complicated than that? Stepped by volume? Are there any caveats? Are you privy to this information as a customer?

CD Baby themselves state: “What we’re paid by partners varies, however, and contractually we are not allowed to disclose those amounts to anyone who is not yet a CD Baby customer. Depending on what level service you sign up for with CD Baby, some partners may pay less per song, and streaming clips pay much less — but we still pay you 91% of all download and streaming revenue”

TorrentFreak posted a follow-up to their previous article, in which they claim: “In fact, TorrentFreak has heard from various sources that independent distributors can get deals of at least $0.03 per play with Spotify. This adds up to a pay day of $30,000 instead of $167 for a million plays, which suddenly sounds like an altogether better deal.” – http://torrentfreak.com/spotify-isnt-ripping-off-artists-the-labels-are-091123/

Would be interesting to know what CD Baby’s deal is compared to some other known independant artist going ‘directly’. I haven’t created enough of my own music (yet) to warrant exploration, so I don’t know if it’s even possible to approach Spotify directly without some sort of representation from a group such as CDBaby or a record label…

As a former Copyright & License Manager in a small Canadian indie record co., all I can add to this is that “The Times They Are-A-Changing”. Growing pains aside, one can expect to see many new biz models rise and fall while we all go through the transition from the LPs & Cds to files, files-sharing, listening “from the cloud”… Some how, I can’t really see contracts being anywhere near up-to-date between the time you sign an artist and the various technological changes and new listening habits once their music is out there. And all this still varies from country to country in a world where one can get around geolocation fairly easily.
At least, it makes great food for thoughts on a daily basis.
Thanks again for the thorough analysis and the intelligent comments.

Nice article. Spotify is clearly good news for the artists. The labels are also making good money. What about Spotify? With these massive payouts can they ever become profitable? Will any of these startups (Spotify, We7, Deezer…) provide a return to their investors?

[…] recently that Lady Gaga earns $167 for every 1,000,000 plays on Spotify. Musician Steve Lawson did some analysis that shows that one million listeners on radio would net Lady Gaga £9.18 (which is about $14 as I […]

Steve – you caught the big point that I missed in my own article comparing old radio to new streaming. Per play vs. per listen is really the fundamental difference here, and really does provide context to the revenue issue. Nice work!

I think they are still dealing overall with a decline again in 2009, the first half-year, particularly in ther US will have been very slack.

I presume that coyness is why the figures from the collection agencies are so late. They only have press departments capable of waliking tall while talking about success and they don’t have the moral fibre or the incentive to disclose poor numbers.

The 2008/9 Gema Annual report talks clearly – again without any numbers produced beyond 2007 – about numbers in decline, and about how they will be making cost reductions but feel a need to remind any concerned readers that they are “successful and financially sound”

Hi Steve! Hope all´s well. The Spotify model seems to be as realistic as micro accounting can get these days, before the rise of the machines (who would then start to think for themselves and destroy the earth etc!). I wish someone would tell Fripp, who´s extremely conspicuous by his absence.

At the moment, iTunes (for example) usually sells tracks for .99 US cents for a permanent download. If iTunes starts offering things like custom streaming options, then they might sell the right to always stream that same track for (guessing) only .10 cents. The customer would not download the track or own it, but always be able to call up a specific track anytime on their iTunes device, forever.

The rates paid to labels or musicians (if they own their music) for streaming are minimal compared to the rates for permanent downloads.

For the current style of .99 permanent download, (I think), iTunes pays .79 US cents to the label or aggregator, which then has to pay mechanical royalties of about .9 cents, and then artist royalties (if they do that at all).

For the sale of a streaming track (in the Lala/iTunes style), they would probably pay fractions of peanuts to the rights holders.

What I really doubt is that the rights collection organizations can really keep track of all of this. PRS, GEMA, Harry Fox, et al will be hard pressed to find a system to track all of the billions of streams, even though everything is encoded. They will be relying on the accounting procedures and goodwill of Spotify, Lulu, etc to report things accurately.

Sorry for the slightly off-topic detour. To get back on topic, I would say streaming services: good. Yes, stream our music—get it out there. And, yes we can’t forget that streaming services are also businesses trying to make money from and with all of their business partners.

1. comparing 7.7million plays in one small window of time in a format that the listener can’t repeat over and over with one like the spotify experience of being able to endlessly listen to a track is a bit silly imo.

also, what do you think about less popular music on indies? where one sale means a hell of a lot more proportionally? 50’000 listens for someone small would be amazing, but on spotify it would make them literally a few pence, if that!

Interesting. I was at a meetup here in Boston on Music Branding 2.0 and one of the panelist talked about how much Lady G got for 1 million listens and everyone was like, “oh my, that model will never work”. Your post really helps put it all into perspective and I’m now back on board the Spotify train. Thanks.

[…] evidence of the internet destroying recorded music as we know it? Well … no, actually, as Steve Lawson points out: [The original report about the Spotify royalty] does mention that she’s had 20 million paid […]

I am very confused about why this comparison would be considered a useful one.

With Spotify you can listen to any track (that’s on there) any time. In what way is this comparable to radio? It’s more an internet jukebox that obviates adding new titles to a record collection and so should compensate the artist for their reduced record sales.

My conception of radio: audio stream curated by some other person, who plays what they want when they want. It is ephemeral and so “current” and thus can be useful to publicise the work of an artist in hope of sales. Same for any PRS-style plays such as at a cafe etc.

My point is that to the listener, Spotify does not replace radio; it replaces recording purchasing with all-you-can-eat subscription. So surely when evaluating the value to the musicians you should compare the revenue from Spotify with the revenue from recording sales, not with radio plays.

As a Spotify subscriber I had imagined my cash finds its way to the musicians I listen to. There needs to be a better channel for that, and something like Spotify could be it. This article shows this is not happening.

And I don’t see how Open/Premium/Unlimited makes much difference to that. None of them are any more like radio than the other. Only thing is Unlimited obviates record purchase completely because it works offline.

Please tell me if I have the wrong end of the stick here. I’m just trying to make the right comparison!

It seems the dubious practice of buying a CD then ripping it and sharing with friends earns the artist more money than if all those friends use Spotify to listen to it constantly for months. Right?